To convert a quoted exchange rate, read the quote as “1 unit of currency A = some amount of currency B”. Multiply to go from A into B, and divide to go from B into A.
This lesson is part of trade and exchange rate reasoning. It gives the direction skill that interpreting exchange rate changes relies on.
What is the two-line check?
Before any arithmetic, write two lines.
- The quote in the form “1 [currency] = [amount] [currency]”.
- The direction you need: from which currency to which.
If you move from the left currency of the quote to the right one, multiply. If you move from right to left, divide.
Worked example: the Rupa
A fictional quote says 1 Rupa = RM0.30.
From Rupa to ringgit. A bag costs 150 Rupa. You move from left (Rupa) to right (ringgit), so multiply: 150 × 0.30 = RM45.
From ringgit to Rupa. A jacket costs RM60. You move from right to left, so divide: 60 ÷ 0.30 = 200 Rupa.
The size check agrees. One Rupa is worth less than RM1, so 150 Rupa should be a smaller number of ringgit, and RM60 should be a larger number of Rupa.
Which mistake costs marks?
The common slip is multiplying RM60 by 0.30 to get 18. The arithmetic is right but the direction is reversed, and the answer says the jacket is worth only 18 Rupa, which contradicts the size check.
Another slip mixes quotes. A student uses RM0.30 in one line and the reverse quote, about 3.33 Rupa per ringgit, in the next. Pick one quote and stay with it.
A rate change
Suppose the quote moves to 1 Rupa = RM0.36. The Rupa now buys more ringgit.
The change is 0.36 − 0.30 = 0.06, which is 0.06 ÷ 0.30 = 20% of the old value, so the Rupa has risen by 20% against the ringgit. The 150 Rupa bag now costs 150 × 0.36 = RM54. Imports from the Rupa country are dearer in ringgit.
Check yourself
The quote is RM1 = 5 Kepin. (a) Find the ringgit price of a book that costs 35 Kepin. (b) Find the Kepin price of a pen that costs RM12.
Answer
The quote reads RM1 on the left and Kepin on the right.
(a) From Kepin to ringgit means right to left, so divide: 35 ÷ 5 = RM7.
(b) From ringgit to Kepin means left to right, so multiply: 12 × 5 = 60 Kepin.
Size check: one ringgit buys 5 Kepin, so a Kepin is small. A Kepin price should turn into a smaller ringgit figure, and RM7 is smaller than 35.
What to study next
Move on to explaining an import cost change under explicit ceteris paribus assumptions, then try the sub-area practice.
If you want a teacher to watch your first line on new quotes, see online one-to-one Economics tuition.